Local Ad Dollars, Slip Sliding Away

There's a good but depressing article in the Wall Street Journal about how newspapers are continuing to fall behind in the local online advertising derby–even as their print ad revenues are ebbing away. According to Borrell statistics cited in the story, newspaper share of the local online ad market has fallen to 27.4 percent from 35.9 percent two years ago. Things aren't going in the right direction. That's not good–especially when the overall local online advertising market is growing, ahem, at a 57 percent annual clip.

The Journal story lists several reasons for the newspapers' local online advertising problems, unfortunately well-known to anybody who's been around newspaper online ad sales operations:

• It's hard to get sales reps interested in selling less-lucrative local online ads.
• Small local advertisers generally don't buy banner ads favored by larger national advertisers (and still the standard ad on most newspaper Web sites).
• Strategies of bundling print and online advertising may cause more cannibalization than added sales. 
• Local online ad growth is coming from small- and medium-sized business–which traditionally haven't been significant advertising customers of most good-sized dailies.

That last point is particularly interesting. In print and online, most papers, by covering a broad metropolitan area, are more attractive to larger local advertisers like car dealers and banks. Smaller advertisers–the pizza parlors, nail salons, mom-and-pop stores–don't want the broad geographic reach that papers offer, and can't afford the high rates. And they're harder to sell to (and the commissions aren't as large). 

So newspaper sales reps traditionally haven't called on those smaller advertisers. But there are lots of them, and other media are moving in–community papers, local Web sites and blogs, even Google, Yahoo and specialty sites like Yelp. That's what's crowding the newspapers out of their own markets, online.

At Backfence, we saw that there was definite interest by these small merchants and service providers in advertising online on a focused local site. But newspapers, for the most part, still don't have significant offerings of that type. Not only are they not selling the ads, they often don't really have the strong local online products to sell them on. Want to dominate the local online market? Start with a killer local entertainment guide. But most newspaper sites still haven't figured out how to provide readers–and advertisers–with a topnotch local events guide. And hyperlocal coverage, which gives those small local advertisers access to customers nearest to them, is still a pipe dream at most newspaper Web sites.

All of this is quite unfortunate, since newspapers at this point need every ad dollar they can find, and those small local businesses represent a largely untapped pool of potential ad revenue. To get it, newspapers need to really change the way they approach their local market, online. Some suggestions:

• Build a strong local product to attract local advertisers–an entertainment guide, hyperlocal sites, a site targeting a specific local demographic, whatever.
• Push the cost of ad sales down as low as possible. No more high-salary, high-commission sales reps who can only score decent bucks by selling another car dealer ad. Try commission-only telemarketing reps smiling and dialing to blanket small local businesses.
• Self-serve advertising tools. Make it easy–really, really easy–for small advertisers to come online, create, place and pay for an ad. That drives the cost of sales way down. Did I mention it has to be easy? Most newspaper sites haven't mastered that concept for simple things like placing online classifieds, unfortunately.
• Seminars for local businesses on online advertising (see the Bakersfield Californian example in the Journal story). It's still new to many, many small business owners. Educate them on the value of online advertising and how to take advantage of it. 
• Don't sell only your own products. Deploy ad reps with a portfolio of offerings to local businesses that might include ads on Google, Yahoo, or even the Yellow Pages. You've got the feet on the local streets--use them.
• Experiment with new online advertising forms. Banners and tiles aren't the only way to advertise online. In fact, they're quite tired (clicked on a banner ad lately? Anyone? Bueller? Anyone?). Try everything from text ads to interactive ads that couch the ad message in a game or quiz. Sell sponsorships of various elements of the site. And don't forget video ads, which are becoming very popular among local advertisers. Real estate walkthroughs, chefs describing their restaurants–these videos seem obvious, but they're still few and far between on newspaper sites. 

Newspaper competitors online already are doing all of these things. Just as on the news side, too many papers are still trapped in a business and operational model that dates to just after the days of Ben Franklin and John Peter Zenger. Local online advertising represents a significant source of badly needed advertising revenue. Newspapers can't afford to let it slip away.

Comments

[Howard Owens]

Credit where credit's due department: Bob Cauthorn was singing the "go after ma and pops online" song more than a decade ago.

[ed]

Comes now the U.S. government reporting that 2nd quarter economic growth was actually up, and that the statistics did not reflect a recession that everyone predicted was here. So how do we explain those dreary 2nd quarter reports from the newspaper industry? Was the slow growth registered in the GNP figures amplified into a recession for the newspaper division of the economy? Or are these just preliminary GNP figures we should not pay that much attention to because they will be adjusted down later?
Or is there something more fundamental shifting here? I think the latter, and that the steps newspapers are taking are actually contributing to their problems, dragging down morale and resulting in less compelling content. Look at all the wasted energy going into layoffs and redesigns (and it not just TRB but MNI is quietly doing redesign as well and has a new Sacramento Bee to prove it). Look at the Chicago Tribune project, which started in June with three committees looking at redesign composed of 38 high-level Chicago Tribune execs. There is a steering committee composed of 13, a "news group" of 14 more, and a features group of 11. They are to unveil their result in September. I have to ask who is putting out the Chicago Tribune during these months of committee planning, markups and meetings? If I were Sam Zell I might conclude the newspaper doesn't need these 38 salaries after the redesign is done.
The layoffs also have been dragged out interminably. Ok, execs have to cut carefully, but imagine what it must like to be in the L.A. Times newsroom all these past weeks as you know your future is under discussion behind closed doors. I think the WPO lost a lot of spirit with its cuts, although I can't devise a way to measure that.
Finally, the result of the cutbacks is less coverage, which means fewer fresh stories and fewer new items for Web pages. The value of the NYT Web site is the variety of stories they put up each day, and the depth. Some of other Metro papers look like they have been bombed. Take a look at Modesto, Miami or the N&O to see what I mean.

[Brad Stertz]

Outstanding post. And yes, this isn't new advice. It's astounding how resistant newspaper companies are to drilling for revenue in just about the only untapped ad reserve left to them. More alarming is the wasted opportunities. The Loudoun plan should have worked exactly to your point. The execution wasn't focused to make it work for the audience or advertisers, is my impression. So it became yet another lab experiment headed nowhere.

[Beth Lawton, NAA]

Great post, Mark. We've actually found a number of newspapers that are willing to bring in small, local businesses through solid (online, of course) directory and user-review building strategies. The Boston Globe, The Journal World and Bakersfield, to name a few. So it doesn't seem all is lost in this area, and I think your advice is solid.

On a semi-related note, Peter Krasilovsky weighed in for us on the WSJ article (see the Digital Edge blog at www.naa.org/digitaledge for more) and mentioned this: "Ultimately, we see that newspapers have strong opportunities to enter these new areas of businesses and expect to see a great deal of new activity in this field. It will go beyond building a few vertical directories. The challenge, as the WSJ article correctly points out, is to get their sales and support activity to scale."

[Basil Berntsen]

The reality is that the internet is just a better media for this type of information. It doesn't have the large overhead of printing presses and sales reps, so a company like mine (Brownbook.net) can afford to charge almost nothing.

[George]

As everyone knows by now, video is very exciting. I think in the next few years people will discover that video is appropriate for certain areas of the consumer market, right now it seems like everyone wants to use video for everything. I think the small business arena will benefit the most from video which is pretty much the thesis behind Jippidy.com

[Stan Gauss]

It comes down to 2 things.

1. Newspapers need to do a better job selling the power of their audience and get away from the product of the week.

2. To effectively sell the longtail they are really going to need to understand how to create winning sales plans for doctors, lawyers, plumbers and such.

Getting the business to scale is definitely an issue but before they get to that point they need to understand the business.

[ed]

NYTimes catches up with the industry misery, as you have been reporting for some time:
http://www.nytimes.com/2008/08/04/business/media/04papers.html?hp